Which of the following is NOT an assumption of the Capital Market Theory?
A) All investors are Markowitz efficient investors.
B) All investors have homogeneous expectations.
C) There are no taxes or transaction costs in buying or selling assets.
D) All investments are indivisible, so it is impossible to buy or sell fractional shares.
E) All investors have the same one period time horizon.

Question

Quizplus · Accepted Answer

The Capital Market Theory assumes that investments are divisible, so it is possible to buy or sell fractional shares. This assumption allows for portfolio diversification and the ability to hold a variety of different assets in a portfolio. Therefore, the correct answer is D, which states the opposite assumption.

Which of the Following Is NOT an Assumption of the Capital